Column : Now you see it, now you don’t
The scale of cuts is the largest any finance minister has ordered in the past 15 years in the Indian budget-making process. The two ways this can be done are either through a large hike in the tax base or rates in one of the five major tax streams, or through salami chops on expenditure programmes. Both will be used to some extent, but they will still fall short of producing the numbers the finance ministry will need to come up with to show a 5.3% and a 4.8% of GDP estimate for the fiscal deficit in this and the next fiscal.
Yet this will be possible and the reason for this is that the government’s financial statement is far deeply nuanced than the reading of the budget documents usually makes out. Unfortunately, the rest of this piece will be number-heavy because of the topic involved but that is unavoidable.
As an example, in the budget for 2011-12, the government had assumed a rise in capital formation of 21% in the gross capital formation (see table). The aggregate figure at R82,931 crore seemed healthy, but in the revised estimate for
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